Hertler Market Signal Update
#681 March 2, 2014
Editor, Wally Hertler
Fear Index buy signal is active, other indicators generally bullish
The Smart Money Index made a another new low, thus confirming its long term down-trend. The inverse relationship with stock prices makes the bearish trend for the SMI bullish for stocks.
The late market component (LMC) of the Smart Money Index plunged to a another new low. It is decidedly bearish.
The EMC (early market component of the SMI) climbed back up to (resistance at) its 50-day moving average. It continues to diverge with the S&P 500 Index, which is at a new high. This is potentially bearish despite the EMC usually being a lagging indicator rather than a leading indicator.
Barron’s Confidence Index fell to 71.7 and is now below the 50-week moving average, which is bearish.
The smart money OEX put/call ratio has fluctuated in a range that can be defined as bearish around 1.9 and bullish around 1.4. The ratio fell far below the1.4 level close to recent lows before turning up. It is bullish.
The “smart money” OEX 15-day P/C open interest fell a bit more last week and is approaching the lowest level in nearly three years. It is bullish.
The equity put/call ratio turned down upon climbing to the descending trend-line connecting the tops of its rallies beginning with the 6/3/2012 market low. We would expect the ratio to decline from here as the market rises until the ratio makes a new low.
The total put/call ratio turned down. The ratio’s high was substantially lower than previous highs associated with market lows. If the market continues to rise, the ratio should continue to fall.
The small cap/DJIA broke above resistance at the double top which is bullish.
The ratio of the NASDAQ Composite to the S&P 500 continues to surge to new highs, which is bullish.
The Fear Index 5-DMA, instead of plunging decisively through the 50-day moving average (buy signal) as with earlier buy signals, has crept along the 50-DMA.
The AAII Member Bullish Oscillator fell very close to zero where it reversed direction. Although rising and above zero, it is not yet at an extreme.
The Citigroup Panic/Euphoria Model (from Barron’s) at 0.55 is well into the Euphoria level near the highest level in nearly five years. It is the only extended excursion into the Euphoria region since the bull market began in March 2009.
The Fear Index buy signal remains active (barely).
Barron’s Confidence Index is bearish.
The (dumb money) equity and total put/call ratios are relatively bullish.
The smart money OEX put/call ratio is bullish.
The Citigroup Model is in the Euphoria region and continues to be bearish.
The AAII members’ bullish oscillator is rising and bearish, but it is not yet at an extreme.
The relative strength of the small caps and the NASDAQ Composite Index is bullish.
Generally speaking, the indicators are bullish.
The Smart Money Index remains in a long-term down-trend, which is bullish for stocks. But the sharp drop in the SMI is due primarily to the heavy selling by the smart money LMC while buying by the EMC is hesitant – a seemingly bearish scenario